Technology

Consumer groups slam Universal-EMI deal ahead of Senate hearing

{mosads}The Federal Trade Commission (FTC) is reviewing the deal.

In their economic analysis, the two groups, Public Knowledge and the Consumer Federation of America, argued that the merger would eliminate a “maverick” competitor and stifle competition for digital music.

“Simply put, the post‐merger firm will have a strong incentive and increased ability to exercise market power, particularly in undermining, delaying or distorting new digital distribution business models, in a market that has been a tight oligopoly for over a decade,” the groups wrote.

The paper rejects Universal’s argument that online piracy prevents any one company from dominating the music industry, saying the industry overestimates the influence of copyright infringement.

The groups compared the proposed merger to alleged collusion in the e-book industry, which the Justice Department has filed suit to stop. 

When Public Knowledge and the Consumer Federation first made this comparison in a recent letter to lawmakers, Universal accused the groups of misunderstanding the cases. The e-book suit involves allegations of price-fixing, not a merger.

In Thursday’s paper, the groups argued the e-book case “does show us that digital markets are not immune to abusive pricing behavior.” 

“Action by entities that controlled a market share that was not terribly greater than the post‐merger market share of UMG‐EMI was successful in pushing up the price with the goal of controlling competition from digital distribution,” they wrote.

But in an emailed statement, a Universal Music spokesman said the consumer groups “vastly overstate market concentration.” 

“The music industry is intensely competitive and barriers to entry have evaporated in today’s digital environment,” the spokesman said. “Labels cannot dictate the price in a marketplace where a handful of major retailers account for the majority of music sales. We welcome the opportunity to address the facts and do away with any myths.”

The spokesman also said Universal is “committed to reinvesting in EMI,” which has struggled financially in recent years.

The European Commission is expected to file an antitrust complaint over the deal in the coming days. An antitrust complaint does not necessarily mean the commission will block the deal, but it could force the companies to make concessions. 

— Updated at 2:37 p.m.

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